Last week, crude oil prices rallied by around $4 per barrel mainly due to the productions halt from six oil and gas fields in the Norwegian North Sea and the impact of Hurricane Delta.
The Norwegian Organisation of Managers and Executives (Lederne union) called for a strike which started on 30 September over a pay dispute. The first impact on oil production was felt on 5 October last Monday, whereby an equivalent of 330,000 barrels of oil production was halted, leading to a rise in crude oil prices to $39 per barrel. Nonetheless, the strike ended last Friday after Norwegian oil companies came to an agreement with the labour union officials, putting an end to the oil production outage. With the resumption of oil production, crude oil prices started to decline.
Meanwhile, Hurricane Delta had been leaving devastation across the Gulf Coast last week. Delta was reported to have damaged homes and equipment, cut electric power and disrupted energy operations after it made landfalls on several parts of the Gulf Coast. As a result, oil companies were forced to shut down productions. This led to a decline in supply which pushes crude oil prices up to $41 per barrel. Official reports disclosed a total halt in production of 7.11 million barrels of oil last week. Hurricane Delta was reported to have dissipated on Monday.
Moving forward, we may be seeing a decline in crude oil prices. Just when the demand for oil has not been improving well with the growing number of COVID-19 cases in Europe and the United States, Libya’s state energy company National Oil Corp, lifted force majeure at the largest oil field Sharara over the weekend. It was reported that oil production in Libya will be doubled to around 600,000 barrels per day. Furthermore, the resumption in oil production by Libya will pose a challenge to OPEC when it comes to market rebalancing since Libya is exempted from the production cut carried out back in May as a measure to help oil prices recover. This means that the OPEC will have to decide if they should stay with the current level of oil production or postpone planned increase in production during their next meeting on 30 November. Unless global economy opens up further while making good progress in the containment of COVID-19, the increase in oil supply may potentially drive oil prices down.
(This article was originally published on Samtrade Academy on 15 October 2020)
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